While the phrase ‘invest with conviction’ might sound cliché, it’s a fundamental principle. If you don’t have confidence in a company’s long-term potential, it likely doesn’t belong in your portfolio. While every stock carries risk, Warren Buffett’s advice to “buy what you know” still holds true.
Below, I have highlighted three fundamentally strong high-conviction stocks from the healthcare and pharmaceutical sector: AbbVie Inc. (ABBV), Merck & Co., Inc. (MRK), and Bristol-Myers Squibb Company (BMY) that one could consider investing in the near term. These stocks have earned a ‘Strong Buy’ rating in our proprietary POWR Ratings system.
The medical-pharmaceutical industry is set for strong, long-term growth, driven by rising global healthcare demand and groundbreaking medical advancements. By 2050, the world’s population aged 60 and above will double to 2.1 billion, leading to increased healthcare expenditures. As healthcare spending takes up a larger share of global GDP, pharmaceutical companies are racing to develop more effective, personalized treatments to meet this growing need.
At the same time, major breakthroughs in AI-driven drug discovery, genomic research, and personalized medicine are reshaping how diseases are diagnosed and treated. In fact, over 85% of biopharma executives plan to increase their investments in AI, data analytics, and digital health in 2025 to enhance efficiency and innovation.
As a result, spending on AI in healthcare is projected to touch $208.85 billion by 2030, growing at a CAGR of 42.3%. Moreover, the global pharmaceutical market is expected to hit $3.03 trillion by 2034, exhibiting a CAGR of 6.2%.
With that in mind, let’s evaluate the three Medical - Pharmaceuticals picks, beginning with the third choice.
Stock #3: AbbVie Inc. (ABBV)
ABBV is a global diversified research-based biopharmaceutical company engaged in manufacturing and selling medications and therapies. It offers a comprehensive product portfolio across Immunology, Oncology, Neuroscience, Eye Care, Aesthetics, and Other Specialties.
On December 13, 2024, ABBV announced the acquisition of Nimble Therapeutics to strengthen its immunology pipeline further. The deal includes Nimble’s lead asset, an investigational oral peptide IL-23R inhibitor currently in preclinical development for psoriasis, as well as a pipeline of innovative oral peptide candidates targeting various autoimmune diseases with significant unmet needs.
Additionally, ABBV will gain access to Nimble’s proprietary peptide synthesis, screening, and optimization platform, designed to enable the discovery and optimization of oral peptide therapeutics.
On October 30, the company’s board of directors increased the quarterly dividend from $1.55 to $1.64 per share, payable on February 14, 2025, to the shareholders of record on January 15, 2025. This reflects an increase of approximately 5.8%, continuing ABBV’s strong commitment to returning cash to shareholders through a growing dividend.
It pays an annual dividend of $6.56, which translates to a yield of 3.45% at the current share price. Its four-year average dividend yield is 3.87%. Moreover, the company’s dividend payouts have increased at an impressive CAGR of 7.5% over the past five years.
During the fiscal fourth quarter (ended December 31, 2024), ABBV’s net revenue increased 5.6% year-over-year to $15.10 billion, while the company’s Neuroscience segment reported net revenue of $2.51 billion, indicating a 19.8% growth from the prior-year quarter. Its oncology and eye care segments also registered a year-over-year increase of 12% and 10.2%, respectively. ABBV’s adjusted net earnings for the quarter came in at $3.84 billion and $2.16 per share.
The consensus revenue estimate of $12.92 billion for the fiscal first quarter (ending March 2025) represents a 4.9% increase year-over-year. The consensus EPS estimate of $2.52 for the same period indicates a 9.2% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus revenue estimates in each of the trailing four quarters.
ABBV shares gained 12.7% over the past year and 7% year-to-date to close the last trading session at $190.14.
ABBV’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a B grade for Growth, Value, Sentiment, and Quality. Out of 148 stocks in the Medical - Pharmaceuticals industry, ABBV is ranked #7. Click here to see ABBV’s rating for Momentum and Stability.
Stock #2: Merck & Co., Inc. (MRK)
MRK is a global healthcare company offering health solutions through its prescription medicines, including biologic therapies, vaccines, and animal health products. It operates through two segments: Pharmaceutical and Animal Health.
On January 31, 2025, MRK announced that the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) has approved CAPVAXIVE™ (Pneumococcal 21-valent Conjugate Vaccine) for active immunization in individuals aged 18 and older.
If granted final approval in the EU, this would mark the fourth authorization of CAPVAXIVE for preventing invasive pneumococcal disease and pneumococcal pneumonia in adults, further expanding its global reach in combating these serious infections.
On January 28, the company’s board of directors declared a quarterly dividend of $0.81 per share of the company’s common stock for the second quarter of 2025. This dividend is payable to its shareholders on April 7, 2025.
With 14 years of consecutive dividend growth, MRK’s annual dividend of $3.24 translates to a yield of 3.25% on the current share price. Its four-year average yield is 2.88%. The company’s dividend payout has grown at a CAGR of 6.1% over the past three years.
MRK’s sales for the third quarter ended September 30, 2024, increased 4.4% year-over-year to $16.66 billion, while its KEYTRUDA product sales improved by 17.2% from the year-ago value to $ 7.43 billion. The company’s non-GAAP net income and non-GAAP EPS for the quarter stood at $3.98 billion and $1.57, respectively.
According to the full-year 2024 guidance, MRK forecasts worldwide sales to range from $63.60 billion to $64.10 billion, an increase from the previous guidance of $63.40 billion to $64.40 billion. The company also expects non-GAAP EPS to be between $7.72 and $7.77.
Analysts expect MRK’s revenue for the fourth quarter (ended December 2024) to increase 6% year-over-year to $15.51 billion, while its EPS for the same period is expected to grow significantly from the prior year to $1.68. Moreover, the company topped the consensus revenue estimates in each of the trailing four quarters.
The stock has gained marginally year-to-date to close the last trading session at $99.79.
It is no surprise that MRK has an overall rating of A, equating to a Strong Buy in our POWR Ratings system. It also has an A grade for Quality and a B for Value and Stability. It is ranked #5 in the same industry out of 148 stocks.
In addition to the POWR Rating grades I’ve just highlighted, you can see MRK’s Growth, Momentum, and Sentiment ratings here.
Stock #1: Bristol-Myers Squibb Company (BMY)
BMY discovers, develops, licenses, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It offers products for hematology, oncology, cardiovascular, immunology, fibrotic, and neuroscience diseases.
On January 31, 2025, the company announced that the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) had recommended approval of Opdivo (nivolumab) in combination with Yervoy (ipilimumab) as a first-line treatment for adult patients with unresectable or advanced hepatocellular carcinoma (HCC).
This recommendation is based on the Phase 3 CheckMate -9DW trial findings. The company now awaits the European Commission’s review, which could further advance treatment accessibility for those with advanced liver cancer.
On January 3, BMY paid its shareholders a quarterly dividend of $0.62 per share, reflecting an increase of 3.3% over last year’s quarterly rate of 60 cents per share. This marks the 16th consecutive year the company has increased its dividend and the 93rd consecutive year it has paid dividends.
BMY’s annual dividend of $2.48 translates to a 4.14% yield on its prevailing prices, while its four-year average dividend yield is 3.62%. Its dividend payouts have grown at CAGRs of 6.4% and 7.6% over the past three and five years, respectively.
BMY’s total revenues increased 8.4% year-over-year to $11.89 billion in the third quarter, which ended on September 30, 2024. Its gross profit grew 5.6% from the year-ago value to $8.94 billion, while its attributable net earnings amounted to $1.21 billion or $0.60 per share. Also, its EBIT for the quarter came in at $1.68 billion.
Street expects BMY’s revenue for the fourth quarter (ended December 31, 2024) to increase marginally year-over-year to $11.57 billion, while its EPS for the same period is expected to be $1.47. Moreover, the company surpassed the revenue estimates in each of the trailing four quarters, which is impressive.
Over the past nine months, the stock has gained 36.3%, closing the last trading session at $59.95.
BMY’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Buy in our proprietary rating system.
It has an A grade for Growth and a B for Value, Stability, Sentiment, and Quality. It is ranked first among 148 stocks in the Medical - Pharmaceuticals industry. Click here to see BMY’s rating for Momentum.
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ABBV shares were trading at $189.79 per share on Tuesday morning, down $0.35 (-0.18%). Year-to-date, ABBV has gained 7.81%, versus a 2.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
3 High-Conviction Stocks with Strong Buy Ratings from Analysts StockNews.com
